THE National Living Wage (NLW) is often not worth the paper it is written on, an HR expert has warned, describing it as an “illusion that does not survive contact with the real world of business”.
Currently, the NLW for people aged 21+ is £12.21 but it will rise to £12.71 an hour from 1 April 2026. On paper, that will mean someone working 35, 37.5 and 40 hours a week will take home £23,132.20, £24,784.50 and £26,436.80 respectively a year.
On the surface, the increase to the NLW coming into effect in April sounds like a win for the UK workforce, but in reality experts say the real figure is diluted by myriad factors ranging from unpaid overtime and workplace culture to HR systems that “become accomplices to wage theft”.
Great in theory
HR specialist, Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, said: “From 1 April 2026, The National Living Wage will rise to £12.71. In theory, this is great. But in practice the whole concept of a National Living Wage is an illusion that does not survive contact with the real world of business.
“Increased minimum wages are rapidly undermined if people regularly stay late because they’re worried about losing their job, log on to catch up at home on the weekends or holiday, or do “mandatory” training in their own time, all of which are embedded in many firms’ workplace culture.
“The maths are brutal and all these extra hours quickly dilute the real rate people are earning and make a mockery of official minimum wage figures.”
Underwood warned employers that if the hours being worked by staff take them below the National Living Wage, they’re non-compliant and at risk of being penalised by HMRC.
For example, if a business pays a member of staff £24,784.50 for a 37.5 hour contract but they actually do 45 hours most weeks, their real hourly pay drops to about £10.59, which is below the minimum wage.
She says companies that say to the Revenue that the employee chose to work the extra hours won’t wash if the wider culture in the business culture screams staff need to be always available: “If your business runs on unpaid hours, you are not paying the minimum wage in the real world. You are just calling it that.”
Accomplices to wage theft
Colette Mason, AI Consultant at London-based Clever Clogs AI, agreed that workplace culture dilutes the National Living Wage but says another key part of the problem is the technology companies use to track time worked.
She said: “Many HR systems become accomplices to wage theft without anyone noticing. You’ve got time-tracking software that only logs official hours, managers who praise ‘going the extra mile’ and a culture that treats unpaid overtime as a sign of ‘commitment’ rather than what it actually is: a compliance failure waiting to happen.
“Those businesses at highest risk aren’t the ones deliberately gaming the system. They’re the ones that have built their operational model around the assumption that salaried staff will absorb workload fluctuations for free. That’s not a business model. That’s structural wage suppression dressed up as flexibility.
“The real test isn’t whether your contracts are compliant. It’s whether your actual operation would survive if everyone worked exactly their contracted hours and nothing more. If the answer’s no, you’re not running a viable business. You’re running on borrowed labour that HMRC will make you pay back with penalties attached.”
Praise outputs not hours
To make the National Minimum Wage the same in practice that it is on paper, Underwood said small business should stop praising long hours and praise outputs instead.
She also advised staff not to work overtime or undertake training without official sign-off for the extra hours being worked — and employers to either pay staff more when they work extra hours or ‘TOIL’ it — giving the extra hours worked as ‘Time off in lieu’ of payment.
Underwood also urged business owners to track real hours for a selection of their salaried roles over a 4-week period: “If the job needs 45 hours and not 37.5 hours, redesign it, reprice it or add an additional resource. Don’t sit with your fingers crossed and hope HMRC don’t come knocking.”
Photo by Valeria Nikitina on Unsplash.
